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Quarter of councils made unplanned service cuts to balance the books

The DCLG has a ‘limited’ understanding of local council financial sustainability and the impacts of funding cuts on their services, according to the National Audit Office (NAO).

In a new report – The Impact of Funding Reductions on Local Authorities – auditors stated that by 2015-16 government funding to councils will have reduced by 37%. Within the study it revealed that funding had been cut, in real terms, by 28% over the 2010 spending review period.

Although there have been no financial failures in local authorities in this period, a survey of local auditors revealed that authorities are showing signs of financial pressure.

For instance, over a quarter of single-tier and county councils (those authorities responsible for social care and education) had to make unplanned reductions in service spend to deliver their 2013-14 budgets. The NAO added that auditors are increasingly concerned about local authorities’ capacity to make further savings, with 52% of single tier and county councils not being well-placed to deliver their medium-term financial plans.

The report also highlighted that the DCLG does not monitor ‘in a coordinated way’ the impact of funding reductions on services, and relies on other departments and inspectorates to alert it to individual service failures.

It was added that Department’s processes for assessing the capacity of authorities to absorb further funding reductions are not sufficiently robust.

“Local authorities have worked hard to manage reductions in government funding at a time of austerity. At the same time, there is evidence of some service reductions,” said Amyas Morse, head of the National Audit Office.

“The Department really needs to be better informed about the situation on the ground among local authorities across England, in a much more active way, in order to head off serious problems before they happen. It should look for evidence of financial stress in local authorities to assure itself that they are able to deliver the services for which they are responsible.”

But local government minister Kris Hopkins defended the Department’s work saying that every bit of the public sector needs to do their bit to tackle the deficit left by the last Administration, including local government which accounts for a quarter of all public spending.

“This government continues to deliver a fair settlement to every part of the country – north and south, rural and urban, metropolitan and shire,” he said.

“The reality is since 2010 budgets have been balanced, council tax has fallen by 11% in real-terms and public satisfaction with local government has been maintained. But there is still much councils can do to cut waste and make sensible savings, such as using their reserves, making better use of surplus public sector assets, clamping down on fraud, boosting council tax collection rates and sharing back offices.”

Cllr Claire Kober, chair of the Local Government Association's Resources Board, said that the report paints a stark picture of increasing financial risk and uncertainty for local authorities, adding: “It shows that central government has not taken a comprehensive approach to assessing the impact of its decisions.”

She stated that with further public spending cuts expected in the next Parliament, it is clear that a “more of the same” approach will not work. Instead, Cllr Kober said that devolution to local areas is the only answer.

“Across a wide range of issues, there is compelling evidence that taking decisions closer to the people affected achieves better results and saves money,” she added.

Graeme McDonald, director of Solace, stated that the report reveals how well councils have coped with funding reductions so far.

“But there is now a clear case for local government to move to financial independence from central government, with the ability to raise and spend its own revenue,” he said.

“Expecting Whitehall to have a handle on how each public pound is spent is both unrealistic and undemocratic. Only with devolved powers will local people be able to make the decisions that ensure their money is spent wisely.”

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Devolution, restructuring and widespread service reform: from a journalist’s perspective, it’s never been a more exciting time to report on the public sector. That’s why I could not be more thrilled to be taking over the reins at PSE at this key juncture.
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